The Bucks, the Federal Government, and a Billion-Dollar Question

Public financing for stadiums is having a bit of a moment right now. Charlie Pierce did a great job highlighting the issues surrounding the Milwaukee Bucks’ proposed arena deal last week on Grantland. And this weekend, the New York Times ran an article highlighting the fraught economic situation in Wisconsin.

The article begins by taking us back and discussing how the NBA threatened to move the Bucks to Las Vegas or Seattle if the team’s owners couldn’t come to terms on a publicly financed arena deal. It reminds us of the stakes (“If economists left and right share any single view, however, it’s that local and state governments should eliminate subsidies to arenas and stadiums”) and the context (“From start to desultory end, Milwaukee offered a case study in all that is wrong with our arena-shakedown age”).

And then, in granular detail, writer Michael Powell details the failed grassroots opposition to the arena and the eventual triumph of Bucks ownership, whose pledges of loyalty last year turned into a $500 million stadium this year. While one of the Bucks owners oversees a mortgage company that once owned abandoned foreclosed homes on one side of town, on the other side, the city (along with the state and county) will pay hundreds of millions for a stadium.

Read the whole thing. With a combination of reporting and bone-dry sarcasm, it’s one of the most damning indictments of stadium subsidies you’ll find anywhere.

But like most of the damning indictments of stadium subsidies, we never get to the real problem, or the most realistic way to solve it.

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Don’t blame the owners of the Bucks. This is a tough ask, I know. It’s easy to look at billionaire hedge fund managers like Wesley Edens and Marc Lasry — who pressure Milwaukee officials while their lending companies foreclose on homes elsewhere in the city — and gawk at the audacity and hypocrisy on display. But this is how professional sports operate, and it’s been like this for decades. Owners aren’t crazy for demanding local money to help build a stadium; they’d be crazy not to do it. If cash-printing franchises like the Yankees and Cowboys are building stadiums with massive handouts from local governments, why should anyone expect the owners of the Milwaukee Bucks to adhere to a higher moral obligation?

Teams have real leverage. There are a fixed number of franchises in every sport, demand outstrips supply, and leagues are quick to cosign relocation threats, because it helps establish public funding as the standard model for everyone.

That same model helps ensure that cities will continue having these problems, too. As long as teams don’t own stadiums, it makes it even easier to threaten relocation again a decade or two down the line — it’s not like the owners would be abandoning a stadium that they spent hundreds of millions to build. And so the cycle continues. In every sport, every year.

It comes down to a case of idealism vs. realism. In a vacuum, it’s easy to downplay the value of new stadiums to local economies. It’s harder to quantify the vacuum left behind when one of these teams leaves town for a new home that will pay to attract them. It’s why the Bucks stadium deal ultimately had bipartisan support among local politicians. Cities and states have a choice of either participating in the pro sports business or watching it go elsewhere. Supporting billionaires may look bad, but losing a billion-dollar corporation and the national relevance that comes with it isn’t necessarily a better alternative.

So, somewhere between reading about the billionaire businessmen playing a game that’s rigged in their favor and the state politicians who are left choosing between two bad options, a question occurred to me.

Isn’t this what the federal government is for? If there’s interstate commerce that wreaks havoc on state and local governments as a rule, shouldn’t Congress step in to legislate the business back to sanity?

Even a local politician who helped craft the Bucks stadium deal admitted to the Times, “If Congress considered a law that would prevent any public financing for sports stadiums, I would support that.”

The most productive solution to date emerged without much fanfare earlier this year, buried in the 2016 budget proposal that the Obama administration presented to Congress. As the Wall Street Journalreported in March, the budget included a proposed ban on using tax-exempt municipal bonds to fund stadium projects. This is the way almost all cities have paid for stadiums over the past few decades.

The Minnesota Vikings, for instance, are using $468 million in bonds to build what will be a billion-dollar stadium. The $250 million that’s going to the Bucks is composed of “$55 million in state bonds; $47 million from the city of Milwaukee; $55 million in bonds from Milwaukee County and $93 million in bonds from Wisconsin Center District,” according to Bloomberg. In a separate look at the issue, in 2012, Bloomberg calculated that $17 billion of tax-exempt bonds have been issued for stadiums since 1986, costing federal taxpayers about $4 billion in subsidies to bondholders over the lifetime of the debt.

Saving that money is obviously one benefit for the federal government, but the real imperative should be saving local and state governments from themselves and all the shakedowns that have become standard in pro sports. If local governments can’t be trusted to stop offering welfare to billionaire owners, the federal government can take away the tools they use to make those payments.

Almost as soon as President Obama’s budget proposal was released, it was loudly dismissed by congressional Republicans. This isn’t surprising: Modern presidential budget proposals are mostly symbolic and not presented with any real notion they’ll get passed. But the municipal bond restriction quietly baked into the budget still makes sense. And given the money that both Republican and Democratic state governments are expected to raise for pro sports, there’s no reason it shouldn’t have bipartisan support in Congress.

Billionaire owners don’t deserve public handouts to subsidize their investments. When they buy into pro sports, owners inherit teams that appreciate in value by hundreds of millions of dollars every decade, with TV rights skyrocketing and all kinds of ancillary revenue streams springing from their investment. In exchange for those benefits, it’s fair to ask them to invest in infrastructure and assume some of the risk. It’s how the business should work.

Absent federal regulation, though, it’s naive to expect anyone involved to behave any differently from what just happened in Milwaukee. These scenarios feel outrageous and inexplicable, but they are also close to inevitable. There’s too much money on the line to expect charity from owners, and there’s too much civic pride and political capital on the line to expect local politicians to take a hard stance and send teams elsewhere.

It just seems like we’ve been focusing our energy in the wrong places with this issue. Any time a team asks for public help building a new stadium, we point to the net worth of the owners in question, but not the 30 years of precedent for publicly funded stadiums that have already been built. Maybe raising awareness about these shameless stadium deals will make it harder to sell them politically, but that didn’t work in Milwaukee, and in Missouri the governor and the St. Louis Rams just skirted a public vote altogether on $400 million of proposed funding for a new stadium.

At some point, it’s time to start asking why Congress allows this to happen to a new city every year. Whether it’s banning bonds from being used in these deals or some other kind of intervention, this is the only step that could really change things. In the meantime, demonizing owners or blaming local politicians doesn’t tell the full story.

The Bucks’ owners may not be the bleeding-heart saviors they were advertised as last year, but they’re also not the blackhearted shakedown artists you’re hearing about now. Their stadium deal didn’t game the system; that is the system. If you want to get outraged at anyone, start with the people who can change it.